AQR: Ways To Improve Your Active Risk

Johnny HopkinsCliff AsnessLeave a Comment

In their latest paper titled – Was That Intentional? Ways to Improve Your Active Risk, the team at AQR discuss a number of intentional and unintentional active risks, and how investors can improve their active risk saying:

Investors try to outperform their strategic asset allocation benchmarks by taking active risks. Some of these are intentional, such as active management or tactical asset allocations; but others are low-conviction or even unintentional, such as implementation lags or rebalancing decisions.

Unintentional risks can be a large part of a portfolio’s total active risk. Even if these risks don’t detract from performance, they still make an investor’s odds of outperformance lower than they otherwise could be. When it comes to beating a strategic asset allocation benchmark, reducing these unintentional active risks may be among an investor’s clearest sources of “low hanging fruit.”

You can read the entire paper here:

Click to access Alt-Thinking-3Q20-92820.pdf

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